Why we invested: Agro Supply is helping Ugandan farmers save money and deal with unforeseen shocks

Globally, over 1 billion farmers are impoverished and food insecure. In Uganda, around 75% of the population relies on agriculture and almost 45% live on less than $1.25 a day. Approximately 30% of all rural Ugandans – about 10 million people – live below the poverty line. This includes hundreds of thousands of smallholder farmers who live in remote areas.

Most of these smallholder farmers, especially those located in the regions of Karamoja, East Central, West Nile  and Northern Uganda, face lower food production due to constant dry spells and lack of extension services. These farmers also face cash flow problems: their incomes peak at harvest time, but their greatest expenditure is in the planting season when they should invest in quality seeds, fertilizers, and tools. It can be challenging to manage cash during these cycles. This leads to farmers purchasing low-quality seeds (most of which can’t withstand long periods of drought in most parts of the country) and fertilizer, leading to underproduction on agricultural land. 

Agro Supply is on a mission to transform the lives of the smallholder farmers in Uganda by creating a holistic approach that is helping farmers to afford high quality and hybrid (drought resistant) seeds and organic fertilizers through a save-to-buy model. In addition, the company is offering area yield index insurance to further protect farmers.

Innovation

Agro Supply is building a 4-tier model that focuses on enabling farmers to not only access quality inputs but also be financially included and protected. 

The first tier is layaway payments. Acting as an alternative to microcredit, the layaway payment system helps farmers to save earnings from the harvesting period and redeem their savings at the beginning of the planting season to purchase seeds and fertilizers. Using a USSD code, scratch cards, and mobile money, farmers can also use their mobiles to save little by little. This system allows farmers to lock in savings for agricultural products and tools.  

The second tier is high-quality inputs (seeds, fertilizer and tools). Agro Supply has an internal R&D team that ensures farmers are supplied with tested and quality inputs (for example, drought-resistant seeds). After farmers have saved for three to four months, Agro Supply delivers the pre-paid packages to them before planting season. Agro Supply has partnered with Seedco, one of the best seed companies in Africa to provide farmers with drought-resistant varieties of seeds; they have also partnered with Advanta, an international seed company, which provides farmers with supplies for 6% lower than market price on average. After the inputs are purchased, Agro Supply hires vehicles to transport the seeds directly to their regional stores. The stores are conveniently located and farmers can easily access them. In the rare case they can’t, Agro Supply’s field agents distribute the seeds directly to farmers. Additionally, Agro Supply sells other inputs to large-scale commercial farmers (B2B) on an order-by-order basis, making up about 20% of their annual total sales.

The third tier is customer service and training. To optimize customer yields, Agro Supply provides training on best modern farming techniques as well as tailored planting recommendations to their farmers. Learning is done both physically on the farm through the village agents and digitally, through SMS messages sent directly to farmers. Agro Supply has also made an effort to translate all these extension messages to local languages so smallholder farmers can understand them better, backed with a toll-free number and agents to help farmers anytime they call.

The fourth and final tier is area yield index insurance, based on directly measured yields in an area of land. Agro Supply is currently testing this insurance product, as well as weather index-based insurance. Agro Supply will pay policyholders if the average yields in their area fall below a pre-determined strike point, indicating that a commonly shared climate-related catastrophe has destroyed crops. Unlike weather-index-based insurance, Agro Supply’s policy covers all risks that affect yield, including pest diseases that will be exacerbated by climate change. It insures the value of the purchased inputs (seeds) against low yield. Farmers get compensated (in money or seeds) in case the yields are lower than anticipated. This is an embedded product and its pricing will be included in the price of the seeds. 

Impact

Agro Supply is focused on increasing crop diversity, tailoring planting recommendations to each region’s local context (via SMS, curating videos/audio lessons in local language, and via trained agents), promoting compost use, and encouraging the addition of acidity-reducing lime to soils. They are encouraging legume crops and interchanging cereal crops to fix more nitrogen into the soil. This ultimately leads to richer and more resilient soils that guarantee farmers’ yields. They also provide drought-resistant seeds, which allow desert lands to be arable.

The company has 20K+ rural smallholder farmers onboarded of which about 48% are women. Through its village agents network, Agro Supply has contributed significantly to rural jobs creation in the regions they currently operate (Northern, Eastern Uganda and Karamoja). Agro Supply is also seeking to increase savings frequency among farmers through financial literacy training. Further, farmers don’t pay to use Agro Supply’s system and can use their feature phones to save through the USSD code.

The increasing drought in Uganda has led to a significant reduction in farmers’ yields and hence many families are forced to have only one meal a day. Agro Supply supplies drought-tolerant seeds to their farmers, ensuring that farmers can still harvest great yields even with the adverse effects of drought. Therefore, the company is building resilience among farmers. 

Agro Supply also believes that the people who are involved in growing food should never go hungry. Therefore, they introduced crops such as yellow beans (rich in vitamins) and yellow sweet potatoes (rich in proteins and vitamins) to help the farmers’ families’ nutrition needs.

Growth potential

Since beginning operations in Uganda in 2018 (Northern Uganda, West Nile, Eastern Uganda and Karamoja regions), Agro Supply has experienced strong year-on-year growth of over 50%. In 2018, they had 20 farmers and now they have 20K+ farmers (48% are women) using their system. Their revenues have also been steadily growing year on year, at approximately 50%. Through the provision of hybrid seeds (drought resistant), their farmers have also experienced significant increase in yields per acre (maize by 90%, soybean by 80%, sorghum by 85% and sunflower by 90%) and their income by about $55 additional profit per acre per season. 

They have also built a network of 140+ village agents who help in distributing the scratch cards, delivering training as well as help the company stay connected with the farmers on the ground. 

The Catalyst Fund model delivers outsized success compared with other accelerator programs. We accelerate startups that excel on three fronts:

• Impact: Catalyst Fund startups deliver (or, in the case of B2B firms, facilitate the delivery) life-changing products and services to underserved populations. These can include financial services like loans, savings, insurance, and investment, but also access to productive inputs or essential services such as energy, sanitation, and water.
• Innovation: Our startups are pioneering game-changers that are innovating new products and business models. They drive the sector forward by demonstration effect and via the learning that Catalyst Fund documents and shares.
• Growth potential: Catalyst Fund startups are distinctively investment-worthy, developing businesses that are scalable, with high growth potential. Our startups raise more funding than startups from other accelerators.